Reversal of Fortune for Political Incumbents after Oil Shocks

Publication Date
Financial Markets Group Discussion Papers DP 805
Publication Authors

This paper explores the effect of oil shocks on electoral outcomes. Using a new polling and election dataset for 207 elections across 50 democracies, we show that oil price increases systematically lower the odds of reelection for incumbents. We verify that these shocks—which reduce consumption growth—are associated with worsening performance for incumbents in the run-up to reelection and a reversal in the leaning of the political party in power post-election.